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Election Depression and Investing Thumbnail

Election Depression and Investing


“Individuals who cannot master their emotions are ill-suited to profit from the investment process.” - Benjamin GrahamFather of Value Investing

A couple years ago, Amazon was kind enough to send me a free Echo Show. Presumably so they can listen to everything I’m doing. Against my better judgment, it now sits on my bathroom sink. A news headline caught my eye this morning as I brushed my teeth:

Trump, Biden visit border amid immigration crisis.  

At that moment, it hit me. This is really happening. In roughly eight months, these will be our choices….

Ignoring the guidance of our Buttonwood team, marketing consultant, and business partner, let’s talk politics…specifically politics and investing.

We believe certain investment solutions are superior to others. However, it’s well documented that human behavior, emotions, and biases negatively affect investment returns more than their actual investment selection. This study highlights that the average investor’s return is lower than the return of the funds they own. Meaning, investors fail to capture their full investment return because of purchases and sales, i.e. market timing. 

Politics elicit an emotional response for many of us. We as investors should remind ourselves that “the market” has already priced in both candidates, likely disregards the outcome, and focuses more on how companies plan to serve their customers than whichever candidate wins.  

Trump is abrasive, narcissistic, offensive, and under investigation. The former President embodies the end of democracy for democrats. 

Given this, I try to remind myself Tim Cook, more specifically Apple, doesn’t care who’s in the Oval Office. I’m sure as individuals they have a preference. But once the election is over, Apple will continue working tirelessly to improve products for their customers, increase revenue, and steal market share from their competitors.  

On the other side, a growing percentage of the American voting public believe Biden’s diminishing faculties and faulty memory make him unfit to remain as President. For Republicans, President Biden is feeble and incompetent, working endlessly to undermine our economy and freedom. 

Again, I remind myself Elon Musk doesn’t care. Whoever becomes President won’t disrupt his focus on striving to make Tesla the best car company in the world. In his spare time, he will continue his pursuit of carrying humans to Mars and other destinations in the solar system via SpaceX.

There is no clear evidence the stock market performs better under Republican or Democrat leadership. Further, there is no evidence that election years are unkind to the stock market. 

Please know, we are not dismissing the importance of a Presidential election or how each party will shape the future or our country. Because of this, it’s natural for investors to look for a connection between who wins the White House and which way stocks will go. But shareholders are investing in companies, not a political party. And companies focus on serving their customers and helping their businesses grow, regardless of who is in the White House.